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The Monetary System
THE SIMPLE CASE OF 100-PERCENT-RESERVE BANKING To see how banks influence the money supply, it is useful to imagine first a world without any banks at all. this simple world, currency is the only form of money. To be concrete, let’s suppose that the...
The Monetary System
BANKS AND THE MONEY SUPPLY So far, we have introduced the concept of “money” and discussed supply of money by buying and selling government bonds explanation of the money supply is correct, it is not complete, banks play in the monetary· system. Recall...
The Monetary System
THE FEDERAL OPEN MARKET COMMITTEE The Federal Open Market Committee is made up of the seven member the of the twelve regional bank presidents. All twelve regional presidents attend each FOMC meeting, but only five get to vote. The five with voting rights rotate among...
The Monetary System
THE FED’S ORGANIZATION The Federal Reserve was ‘created in 191J” after a series of bank failures in 1907 convinced Congress that the United States needed a central bank to ensure the health of the nation’s banking system. Today, the Fed is run...
The Monetary System
THE FEDERAL RESERVE SYSTEM Whenever an economy relies on a system of fiat money, as the U:S. economy does” some must be responsible for regulating the system. In the United States, that agency is the Federal Reserve, often simply called the Fed. If you look at...
The Monetary System
WHERE IS ALL THE CURRENCY One puzzle about the money stock of the economy was $699 billion of currency million, the number of adults (age 16 and older) in the United States. This calculation implies that the average adult holds about $3,134 of currency. Most people...
